Net inflows into schemes of active equity mutual funds (MFs) rose 31 per cent in September over August, reaching a five-month high of ₹38,307 crore, as investors continued to ramp up allocation to midcap and smallcap funds.
The two categories, which have seen their combined net inflows increase in each of the past four months, attracted a record ₹15,740 crore in September, up 5 per cent over August.
“They accounted for approximately 44 per cent of net equity inflows in September. The sustained interest in these categories, despite the correction in the broader markets, suggests that investors continue to remain confident about the long-term growth potential of emerging businesses,” said Himanshu Srivastava, principal, manager research, Morningstar Investment Research India.
Market correction in September came after a rally in mid and smallcap stocks in the previous months. The Nifty Midcap 100 declined 7.6 per cent while the Nifty Smallcap 250 fell 3.1 per cent.
They had logged gains in each of the previous five months, leading to their outperformance over largecap indices, which have struggled since the start of the United States-Iran conflict at the end of February.
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In September, the Nifty 50 index declined 6 per cent.
“Investors seemed to have taken market drawdown as an opportunity to add to their portfolio and average their acquisition costs,” said Manish Mehta, chief business officer, SBI Mutual Fund.
Inflows strengthened across other categories as well. Flexicap funds recorded a 32 per cent month-on-month increase in net inflows to ₹6,702 crore, while largecap funds rang up ₹860 crore after witnessing net outflows of over ₹1,000 crore in each of the previous two months.
“The return of positive inflows into largecap funds is encouraging particularly because valuations have become relatively attractive, providing a favourable outlook for the category in the future,” said Saugata Chatterjee, president and deputy chief executive officer, Nippon India Mutual Fund.
The overall increase in net inflows into active equity schemes came as gross investment in active equity schemes rose to a six-month high, while redemptions moderated for a second consecutive month to their lowest level in four months.
Net inflows stood at ₹29,329 crore in August.
Inflows were supported by systematic investment plans (SIPs), the investment in which rose by nearly ₹200 crore to a new high of ₹32,490 crore, shows the data released by the Association of Mutual Funds in India (Amfi).
“This reflects continued investor participation in systematic investing,” said Venkat Chalasani, chief executive, Amfi.
However, debt funds recorded a net outflow of ₹1.8 trillion, largely driven by quarter-end withdrawal from liquid and other short-duration funds to meet advance tax payments and other liquidity requirements. The outflows, along with the mark-to-market losses, resulted in a 5 per cent month-on-month decline in assets under management to ₹87 trillion.